November 2020 Market Outlook
Chris Tubby, November 1st, 2020
November will carve out relationships with the U.S and the rest of the world. On November 3rd if Trump pulls off a surprise victory it will be business as usual for another four years. If Biden wins then we should see corporate tax increases which will have an impact on earnings. Markets are looking for a large stimulus package before the end of 2020.
There are two other potential outcomes (1) No clear winner which could then see a legal challenge from Trump, mainly around postal votes (over 82 m votes so far!) and that could be quick or slow…we simply do not know. (2) Each party controls a House upper/lower which would produce a political deadlock that could last two years (ask Obama!).
It will be a busy first week for sure, with the U.S election, FOMC on Wednesday which could produce a few surprises depending on the election outcome and Friday we have NFP – non-farm payroll. Many countries stopped furlough payments at the end of October which could increase unemployment, although there is the offset that companies will begin employing seasonal staff for the festive period (if consumers are allowed to shop that is). By the end of next week, the markets should have a much clearer picture of how the number one economy will be shaped for the next four years.
Once the U.S election is over we should see the new government attempt to revive the second stimulus package, or if this looks doubtful it will force Powell (Fed) to act and for the Fed to increase their asset purchases across the board. If/when this happens, we should expect stocks to recover and the USD to weaken. Commodities such as gold and oil to potentially increase in value due to a weaker USD and the expectation for demand from the additional stimulus.
As we saw last time there were lockdowns the major tech companies and supermarkets benefited the most and sectors such as leisure and airlines the worst. This may be the case again, although I do not expect the impact to be so great. Much will depend on the government's willingness to make additional payments to prevent many of the companies that barely managed to survive the first time from collapsing now, just as we enter the boom from consumer Christmas buying. Hopefully, companies learnt from the spring lockdown that an internet presence is essential!
If the EU and UK do manage to settle their differences and agree a trade deal (the devil will be in the detail!) then this should see both currencies improve. However, if they fail, it is negative for both economies and I would expect both currencies to weaken with the GBP impacted most.
Have a great November and be lucky!
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